How much $ to retire and how to fund your lifestyle in retirement

[Mokuzai]

Does reading this forum and tinkering with TSLA options count as doing something in retirement??

 

[Beltsbear]

Here's something I struggle with: estimating our annual living expenses after retirement. We track and categorize everything we spend now, and have for years, so historical data is plentiful. We currently have two teenagers and, if things go well, we're probably going to retire right when the youngest one leaves for college in 18 months or so (though she might live at home and go to the community college nearby for the first year while she decides on a major).

That said, using all of this historical data, I've tweaked and modified various categories to best estimate how much we'll be spending when it's just the two of us. The figure I keep coming up with is double or more the "40k to 50k" that I see many people in various online retirement blogs and newsletters say that they expect to spend annually.

In my calculations I've tried to think of everything, including recreation, travel, dining out, new clothing, and even a car payment (because we're going to want to have at least one of our two cars be the latest and greatest Tesla), so maybe I'm being overly generous to ourselves, I dunno. I don't to retire only to sit at home and eat Alpo.

Still, even in a relatively decent cost of living area, without a house payment and our no longer saving for college, I don't see how we can retire comfortably on the $40k or $50k that many sites report as a typical annual retirement expenditure.

I have known multiple individuals who have retired on retirement savings less then 500k per person and lived decades without running out. They are living on 40k per person or less. in the USA. My goal is to have much much more, but you can live in some us states pretty cheap.

 

[Oil4AsphaultOnly]

For those that have or are near F you levels of money, would you ever consider pulling a chunk out of the stock market and buying an annuity for a guaranteed floor of income for the rest of your lives? We have >2x needed expenses, at some point, perhaps at 3x, we would consider doing this for a joint life policy. It would allow absolute peace of mind and allow us to not panic with any market/TSLA big moves.

What say you?

why not put that money into an mREIT then? They pay dividends quarterly (AGNC pays monthly), and are fairly stable.

Annuities are investment vehicles offered by insurance companies, and my parents had whole life insurance (made them cash it out to save what little cash value they had left before it got depleted), so I had direct experience with how bad they were. Keeping a life insurance policy, when you no longer need it, is a sure way to deplete your funds.

 

[FS_FRA]

If he is really personally managing 37 rentals, he is not retired. I would say that even if he had just 10. Now having 37 with a management company is more like retirement.

He sold his business when he turned 50, and retired.

Looking after his RE is one of his retirement hobbies. Some of the properties are multi-generational and he "inherited" the tenants when his father passed away. Some of the tenants he's known all his life.

 

[MikeQ]

I'm in UK.

Everyone has their own situation, but I'm genuinely confused and interested on what I'm missing (and potentially missing out on!). 140k USD is £105k which would put one at 97th percentile in UK.
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If you don't make much in the U.S. then you'd qualify for healthcare subsidies and other programs that would make living on $40-$50k somewhat doable. However, all you would be doing is existing, not living.

At $140k, I immediately have to give up $18k for healthcare and $25k to taxes. Take away another $7k for a health saving account since the $18k I pay for health insurance pays for absolutely nothing until I reach a deductible of $8k PER PERSON. That has me living off around $90k. We put aside money know that we'll need to replace cars, fix roofs, etc... We don't want to exist, we want to live so we have a lot of discretionary spending allotted that allows us to do whatever we want when we want.

Our IRA is at about 4x what we needed to retire so we're not really trying to live a meager existence. Combine that with another 30-40 years of growth and I think we're going to have problem figuring out what to do with money instead of trying to figure out how to save it.

 

[Oil4AsphaultOnly]

If you don't make much in the U.S. then you'd qualify for healthcare subsidies and other programs that would make living on $40-$50k somewhat doable. However, all you would be doing is existing, not living.

At $140k, I immediately have to give up $18k for healthcare and $25k to taxes. Take away another $7k for a health saving account since the $18k I pay for health insurance pays for absolutely nothing until I reach a deductible of $8k PER PERSON. That has me living off around $90k. We put aside money know that we'll need to replace cars, fix roofs, etc... We don't want to exist, we want to live so we have a lot of discretionary spending allotted that allows us to do whatever we want when we want.

Our IRA is at about 4x what we needed to retire so we're not really trying to live a meager existence. Combine that with another 30-40 years of growth and I think we're going to have problem figuring out what to do with money instead of trying to figure out how to save it.

4x already and still invested in TSLA? I'm only at 2x and am already fretting about future RMD's being 2x my peak salary (and the heavy taxes that go with it). Do you have a plan to mitigate the taxes at that time?

 

[juanmedina]

If you don't make much in the U.S. then you'd qualify for healthcare subsidies and other programs that would make living on $40-$50k somewhat doable. However, all you would be doing is existing, not living.

At $140k, I immediately have to give up $18k for healthcare and $25k to taxes. Take away another $7k for a health saving account since the $18k I pay for health insurance pays for absolutely nothing until I reach a deductible of $8k PER PERSON. That has me living off around $90k. We put aside money know that we'll need to replace cars, fix roofs, etc... We don't want to exist, we want to live so we have a lot of discretionary spending allotted that allows us to do whatever we want when we want.

Our IRA is at about 4x what we needed to retire so we're not really trying to live a meager existence. Combine that with another 30-40 years of growth and I think we're going to have problem figuring out what to do with money instead of trying to figure out how to save it.

Wow...what does living mean?

 

[UkNorthampton]

If you don't make much in the U.S. then you'd qualify for healthcare subsidies and other programs that would make living on $40-$50k somewhat doable. However, all you would be doing is existing, not living.

At $140k, I immediately have to give up $18k for healthcare and $25k to taxes. Take away another $7k for a health saving account since the $18k I pay for health insurance pays for absolutely nothing until I reach a deductible of $8k PER PERSON. That has me living off around $90k. We put aside money know that we'll need to replace cars, fix roofs, etc... We don't want to exist, we want to live so we have a lot of discretionary spending allotted that allows us to do whatever we want when we want.

Our IRA is at about 4x what we needed to retire so we're not really trying to live a meager existence. Combine that with another 30-40 years of growth and I think we're going to have problem figuring out what to do with money instead of trying to figure out how to save it.

Thanks for info. I'm trying to work out how much we need. My old figure was very low. So I doubled it and then my wife doubled it again. She was right.

With covid, I might retire early, or at least do a long travel break and get back to work later. I'm hoping/expecting TSLA to get up near to the figure we need and if not, it'll be back to work.

We're pretty frugal - both grew up poor, pretty simple tastes. We have the advantage of free healthcare (as mentioned) and investments in tax-free/low-tax wrappers. Yearly taxes would be around £1500 (house, social security, cars). It's interesting to see how people from different places have to operate - taxes, healthcare etc.

We don't have anyone in real life to relate to with regard to financial independence. Almost everyone we know is struggling, a few doing ok, but they'll retire late 60s/70s.

Best of luck to everyone on their journey.

 

[MikeQ]

Wow...what does living mean?

I guess it means something different for everyone. I'm not someone who enjoys sitting still. To me just having enough to put a roof over my head, feed and cloth myself, isn't living. It's existing.

To me living is being not limited by money. Within reason obviously. The wife and I aren't going to buy a mega yacht like Jeff Bezos and cruise the world. We could afford to buy a nice 50 footer though. We've been retired since September and have booked a nice week long hotel stay every month since. We're a little limited in our travel plans right now with covid but we're keeping ourselves busy. I didn't want to retire and sit on the couch. We started out poor (really poor) and were in the Army as well. We spent our 20's sitting on the couch. It's time to live life.

 

[MikeQ]

4x already and still invested in TSLA? I'm only at 2x and am already fretting about future RMD's being 2x my peak salary (and the heavy taxes that go with it). Do you have a plan to mitigate the taxes at that time?

Taxes are at historic lows right now so I'm trying to get as much out of my IRA as I can. Once I hit 59.5 I'll start taking as much as I can without blowing out my taxes. RMD has been pushed to 72 so that'll give me 12 years to try to get the balances in the IRA down. There's really no other option except to roll over to a Roth but you're going to get hit with a lot of taxes doing that too.

I just computed my RMD with today's figures and it's just over 7 figures. That's gonna be a lot of taxes.

 

[Oil4AsphaultOnly]

Taxes are at historic lows right now so I'm trying to get as much out of my IRA as I can. Once I hit 59.5 I'll start taking as much as I can without blowing out my taxes. RMD has been pushed to 72 so that'll give me 12 years to try to get the balances in the IRA down. There's really no other option except to roll over to a Roth but you're going to get hit with a lot of taxes doing that too.

I just computed my RMD with today's figures and it's just over 7 figures. That's gonna be a lot of taxes.

7 figures, and you're not fretting about taxes? This year is indeed low, and maybe next year as well. But 2022 will definitely mean heavy taxes with that level of distribution. Or do you think the senate will kibosh any onerous tax changes?

Edit: I'm asking, because I've already started my roth conversions this year (and every year for the next 15 years) and am considering taking rule 72t distributions next year (depending on how well TSLA does) to minimize my future tax burden.

 

[MikeQ]

7 figures, and you're not fretting about taxes?

I didn't say I was happy about the taxes, there's just not a lot you can do. One problem with the Roth is that I'm going to have to pay taxes with the IRA itself. I'm probably better of leaving that money in the IRA and letting it grow.

 

[MikeQ]

Edit: I'm asking, because I've already started my roth conversions this year (and every year for the next 15 years) and am considering taking rule 72t distributions next year (depending on how well TSLA does) to minimize my future tax burden.

On your 72t, I'd start with the method that gives you the largest withdraw. If Tesla continues it's massive trajectory, then consider switch to RMD (not to be confused with mandatory RMD at 72). RMD will produce the lowest result but you're allowed a 1 time switch from any of the other methods to RMD. The advantage to RMD is that it re-calculates your allowed withdraw every year based on your Dec31st balance. So if your IRA keeps skyrocketing, you'll be able to increase the amount of withdraw.

 

[Nocturnal]

We track all our expenses through Personal Capital and for this year we are tracking to be under 50k in expenses. We have a 5 year and 2 year old and I feel like spend money on things that we don't need all the time. Our house is been paid off since before I turned 30 and I make 6 figures, the wife works too and we have a paid off rental property. I have not idea what I would buy if I spend 100K a year on... maybe I would replace my Model 3 Performance with a Tesla Roadster . I live in South Carolina so is cheap and maybe that has something to do with it. Thanks to Tesla I can retire with 100k a year including some light call selling but since I am working from home I feel like this is an intro to early retirement and will probably quit if they make us go back to the office full time.

Same. My current gig is super low stress, working from home for the foreseeable future, and pays very well. Even if I hit my magic number tomorrow I'll hang on until this is over. That would just mean I could buy a roadster.

 

[adiggs]

4x already and still invested in TSLA? I'm only at 2x and am already fretting about future RMD's being 2x my peak salary (and the heavy taxes that go with it). Do you have a plan to mitigate the taxes at that time?

I understand the fretting - I think I'm going to be facing something similar. I comfort myself with the knowledge that the big tax bill come with an even bigger income. I like first world problems!

I have no plan for mitigating those taxes except to pay them. I've heard about charitable trusts, like those might help. I haven't researched them yet though.

 

[2daMoon]

I understand the fretting - I think I'm going to be facing something similar. I comfort myself with the knowledge that the big tax bill come with an even bigger income. I like first world problems!

I have no plan for mitigating those taxes except to pay them. I've heard about charitable trusts, like those might help. I haven't researched them yet though.

There are a lot of videos on YouTube about Charitable Remainder Trusts that go into detail about what they are and how they work. Most are by planners who are also selling some services. I found a 6 part series on them by a professor from Texas Tech that was very informative. Here's the first one.

I have some time before having to decide on a plan and want to learn more about as many strategies I can find. The CRT has a lot of potential. It may be just right for getting the most out of an IRA.

 

[2daMoon]

In working out a retirement plan, I've been calculating what future gains might be useful to base projections upon.

Being on TMC, the natural tendency is to project these at a very conservative 100%/year, which would be waaaaaay less than last year ...
but, I'm guessing that most financial planners would recommend using a rate of return on one's investment for retirement planning that was, let's say, more modest.

It seems that for these purposes using a range between 7% and 13.5% (S&P average) might be okay. Though I have no plans to move investments from TSLA, very likely over the next decade, and have well over 90% of my investments in this basket. (I know, I know, diversification. Not for me, but thanks)

In trying to meet somewhere in the middle, while keeping Elon's and other's expectations for ~50% growth each year in mind, I used random gain percentages in a range of 3-15% for each year through 2039 on the spreadsheet to invoke a little turbulence in the hopes of revealing anything else I may need to consider.

I'd be curious to know what gains percentage others contemplating such matters might have used to illustrate how this could affect retirement investment accounts in the years to come.

It would be interesting to see what sort of feedback or strategy you folks might have.

 

[ZeApelido]

In working out a retirement plan, I've been calculating what future gains might be useful to base projections upon.

Being on TMC, the natural tendency is to project these at a very conservative 100%/year, which would be waaaaaay less than last year ...
but, I'm guessing that most financial planners would recommend using a rate of return on one's investment for retirement planning that was, let's say, more modest.

It seems that for these purposes using a range between 7% and 13.5% (S&P average) might be okay. Though I have no plans to move investments from TSLA, very likely over the next decade, and have well over 90% of my investments in this basket. (I know, I know, diversification. Not for me, but thanks)

In trying to meet somewhere in the middle, while keeping Elon's and other's expectations for ~50% growth each year in mind, I used random gain percentages in a range of 3-15% for each year through 2039 on the spreadsheet to invoke a little turbulence in the hopes of revealing anything else I may need to consider.

I'd be curious to know what gains percentage others contemplating such matters might have used to illustrate how this could affect retirement investment accounts in the years to come.

It would be interesting to see what sort of feedback or strategy you folks might have.

www.Firecalc.com has a little simulator. I assuming it's tracking some S&P like index of stocks over the last century. It looks at all the potential outcomes if your retirement started in any given year.

Lots of assumptions, but to me its a nice "worst case" scenario: If you can live off of 3% of your portfolio value per year, you will not have gone in the red in any of the simulations.

 

[MABMAB]

7-10

 

[ZeApelido]

I like looking at worst-case options at a younger age, I don't want to drawdown at all with such uncertain longevity. Need it to last 30 yrs, 50 yrs?

Heck with "genomic revolution", maybe I will be able to live until I'm 120!

Only 60% joking...